How sustainability ROI helps CFOs to back investments

Historically, decarbonisation has been viewed as a compliance exercise, driven by regulation, stakeholder pressure, and/or long-term targets. The case for decarbonisation was commonly framed around net zero commitments, reporting requirements, reputation and stakeholder expectations. Those drivers remain important, but they are no longer the whole picture.

Recently, we’ve noticed a trend. Instead of asking whether they should decarbonise, boards and C-suite decision makers are starting to ask: what financial value can decarbonisation deliver?

They are focusing on:

cost reduction;
risk management;
operational performance; and
return on investment.

Therefore, decarbonisation is being reframed from a compliance requirement into a business performance strategy.

How do you build a business case for decarbonisation using this new framework?

Today, successful business cases are typically built across three areas:

1. Reducing energy costs

For most organisations, the largest and most immediate benefit comes from using less energy. To reduce your energy consumption, you might try:

improving operational efficiency;
identifying and eliminating energy waste;
improving controls and building management system performance;
reviewing operating hours, set points and occupancy patterns;
planning replacements and upgrades well in advance; and/or
optimising systems and assets.

The strongest opportunities are often found where energy, asset and operational data are brought together. For example, an energy audit may identify inefficient equipment, but the business case strengthens when those findings are linked to asset condition, replacement timing, maintenance costs, energy prices and carbon impact.

2. Managing risk and volatility

Global energy markets are increasingly unpredictable. A decarbonisation plan can help reduce exposure to:

fossil fuel price volatility;
carbon pricing mechanisms;
regulatory change
inefficient or ageing assets;
performance gaps across buildings, sites or portfolios;
supply chain requirements; and
changing investor, customer or tenant expectations.

By improving efficiency and transitioning energy sources, organisations can build greater cost stability over time.

A good business case should therefore test not only the expected savings from each intervention, but also the risk exposure of doing nothing. Make sure you ask:

What happens if energy prices rise?
What assets are likely to need replacement within the next five to ten years?
Which sites are most exposed to carbon regulation?
Which upgrades can be aligned with planned maintenance or refurbishment cycles?
Which projects protect operational resilience as well as reduce emissions?

3. Protecting and creating value

As its wider impact increases, decarbonisation is also becoming a factor in:

investment decisions;
asset valuation; and
customer and supply chain expectations.

In sectors such as real estate and private equity, it is increasingly linked to long-term value creation.

For example, we helped Aberdeen track their asset performance, giving them greater insight into their data and briefing their teams of fund and asset managers. They now understand the implications of their decarbonisation journey and the practical steps needed in order to translate their plan into new business practices, including investment and development activities.

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The business case can meet internal resistance if there’s a lack of structure

Despite the clear advantages and opportunities, many organisations struggle with the business case for decarbonisation. Some of the common barriers include:

internal uncertainty around costs and payback;
incomplete or inconsistent energy and carbon data;
difficulty prioritising initiatives; and
a lack of clear, organisation-wide strategy.

In many cases, the issue is not a lack of opportunity but a lack of structure. Projects can fail to progress when they are presented as isolated carbon reduction measures rather than as part of a wider investment strategy.

Finance teams need to understand the commercial return. Operations teams need to understand the impact on performance. Asset teams need to understand the implications for replacement cycles. Senior leaders need to understand the risk, cost and value of action versus inaction.

Strong business cases overcome this challenge by including financial modelling and aligning with wider strategy

A strong business case for decarbonisation typically brings together:

Baseline data: current energy use, emissions, asset performance and cost.
Opportunity identification: efficiency measures, optimisation opportunities, equipment upgrades, fuel switching, renewables and behavioural changes.
Technical appraisal: feasibility, operational impact, design requirements and delivery constraints.
Financial modelling: capex, opex, savings, payback, ROI, lifecycle cost and sensitivity to energy prices.
Carbon modelling: emissions reduction potential, pathway alignment and contribution to net zero targets.
Prioritisation: sequencing based on cost, carbon impact, ease of delivery, risk and asset replacement timing.
Governance: clear ownership, decision points, funding routes and delivery responsibilities.
Measurement and verification: tracking whether projects will deliver the expected savings allows organisations to see decarbonisation plans as part of a coherent investment strategy with a significant financial return.

For example, a lighting upgrade may offer a short payback and be easy to implement, while heat decarbonisation may require more detailed feasibility work, grid capacity assessment and longer-term capex planning. Both may be important, but they need to be assessed and sequenced differently.

A good business case helps organisations decide what to do now, what to plan for later and what needs further investigation.

An example of integrating decarbonisation into standard business practices

LaSalle Investment Management recognised the need to integrate a decarbonisation strategy across all their global functions and regions. To support them, we followed the pattern outlined above:

We reviewed the relevant data and fed back to the team through a series of webinars.
We identified the material, climate-related risks and opportunities.
We outlined the costs and performance requirements necessary to achieve NZC performance, and what the most cost-optimal asset plans were.
We reviewed how management processes were structured across leadership, acquisitions, developments, risk and strategy, and asset management. Then we presented our findings in a way that was tailored to business priorities, focusing on the aspects of different roles that would be the most affected by these issues.

The outcome was a success; LaSalle now has an industry-leading global position on net zero carbon, covering both operational and embodied emissions.

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Get expert insight on making the business case for decarbonisation

Our report - Is the business case for climate action broken? - sets out how organisations are combining cost reduction and carbon strategy to deliver measurable financial returns.

It includes:

real examples of ROI and payback;
guidance on prioritisation; and
practical steps for building your own business case.

Read the report

The takeaway

Decarbonisation is no longer just about targets. It’s about proving that carbon reduction projects can benefit businesses financially, operationally, and strategically.

Speak to our team

Our sustainability experts are well-versed in helping businesses win board approval for sustainability projects.  We show our clients how to identify and leverage financial and incentive mechanisms to maximise support for project design and implementation.

If you'd like to discuss this topic further, please don't hesitate to get in touch with us.